SMM Lead Market Daily Review (2015-10-12)

SHANGHAI, Oct. 13 (SMM) – SHFE 1512 lead touched a low of RMB 13,515/mt after starting Monday trading session but later returned to RMB 13,650/mt thanks to growing longs and exit of shorts. The most actively-traded contract closed the day RMB 180/mt or 1.34% higher at RMB 13,655/mt. Trading volumes saw a rise of 1,122 to 6,598 lots and positions increased 880 to 14,394.

On Monday, Jinsha brand prices were mainly RMB 13,650-13,680/mt, RMB 0-15/mt above SHFE 1512 lead in Shanghai, versus RMB 13,620-13,650/mt for Nanfang brand and RMB 13,580-13,620/mt for Humon brand. Those three brand goods were shipped to market. Supply of Jinsha brand increased with some transactions done as high as RMB 13,680/mt. Following the growth in SHFE lead, downstream buyers purchased for immediate consumption. Trading was contributed mainly by traders yesterday.

A total of 30 market players surveyed by SMM revel the following:

40% industrial insiders are bullish towards lead prices and they expect LME lead to stabilize at USD 1,800/mt this week and SHFE 1512 lead to touch RMB 13,750/mt. On the macro side, US Fed’s concerns over overseas economy and financial market slow the pace of interest rate hike. Besides, markets expect US September’s annualized PPI and monthly core retail sales to be discouraging. As such, US dollar index is likely to go down. This, combined with rising crude oil prices, will lend support to lead prices.

Additionally, lead prices should continue to seek support from rising zinc prices due to Glencore’s cut news. Technically, LME lead broke out above all the moving averages last Friday and remains at highs. In terms of demand, cold weather quickens replacement of ignition batteries, pushing operating rate up at automobile battery makers. In response, this helps to grow demand for refined lead.

17% investors see LME lead to slide to USD 1,700/mt this week and SHFE lead to test support at RMB 13,400/mt, citing a growth in refined lead supply and slack season for motive batteries. Jinli Lead gradually ships goods to market heading into October and Jiyuan Wanyang Smelting Group recovers operation at present and should contribute to market supply this week, which will ease supply tightness. Moreover, Jinsha brand lead starts to trade in Shanghai market this week, growing supply further. Leading battery makers will restart price wars against slowing replacement of motive batteries, constraining lead prices.

The remaining 43% respondents point out that LME lead will hover around USD 1,750/mt this week and spot lead will trade in RMB 13,500-13,650/mt. Primary lead supply grows but secondary lead supply remains tight, leaving overall supply basically unchanged. Consumption on automobile batteries turns better, motive batteries enter an off-season though.